Efficiency against the odds

The tension was palpable last Wednesday (13 June) in a sideroom of the European Parliament building in Strasbourg. MEPs and member states knew that it was their last chance to reach a deal on the European Commission’s proposal for an energy-efficiency directive.

Failure to agree could have resulted in the proposal being abandoned – which would have been a huge embarrassment for everyone involved. With member states refusing to budge, the Parliament’s team, led by Claude Turmes, a Green MEP from Luxembourg, had to make a decision: accept a watered-down directive that would not get the EU to its goal of improving energy efficiency by 20% by 2020, or risk delaying an efficiency directive by years. They chose to take what was on offer.

On Thursday morning, as news emerged that a deal had been reached, the MEPs and the Commission tried to put on a brave face. But it was evident that member states had successfully managed to water down the Commission’s proposal to such an extent that it will deliver only two-thirds of the energy savings promised in the initial text. It may, however, have been the best they could expect from member states anxious about any extra spending.

Turmes said the agreement would “give a boost to Europe’s economy and help achieve our energy security and climate goals”. Martin Lidegaard, Denmark’s environment minister, who supported the Commission’s proposal, said: “We have managed to get support from member states for a more ambitious directive than anyone would have dreamt of only a couple of months ago.”

Speaking in Luxembourg after energy ministers officially signed the deal on Friday (15 June), Günther Oettinger, the European commissioner for energy, said that although the agreement did not go as far as the Commission had wanted, it still marked a turning point in EU energy policy. Of the three climate targets agreed in 2007, that for increasing energy efficiency by 2020 is the only one not written into EU law. The other two – a 20% share of renewables and 20% reduction in emissions – have been made legally binding, by the renewables directive and the effort-sharing decision of 2009.

The legal text agreed last week does not make the target binding, but does write into law measures that go some way to meet that target.“Energy efficiency was for years the most important point, and the weakest point, on our EU energy agenda,” said Oettinger. “Now we have an agreement, a binding regulation. In these times, with the euro crisis and all our budget issues, Europe could make clear that we have good governance.”

Based on current policies, the EU is set to achieve only a 9% energy-efficiency improvement by 2020. The Commission says its proposal would have fully closed the gap, if separate fuel-efficiency improvements made in the transport sector are taken into account. But the agreed version will deliver only a 15% improvement, leaving a significant gap.

‘Better than nothing’

There is a sense of relief that this difficult dossier has at last been resolved. But many environmental campaigners, policymakers and businesses are angry that member states diluted the proposal while talking about how important the directive is to stimulate growth.

“The energy-efficiency directive was a golden opportunity to help lift Europe out of the crisis by creating jobs, cutting harmful emissions and increasing energy security,” said Agathe Ernoult of campaign group EEB. “European leaders have spectacularly failed to seize this opportunity.”

The most serious blow to the directive came from a list of exemptions added to the energy-savings obligation – the backbone of the Commission’s proposal, representing 70% of the energy savings. The proposal required energy companies to ensure that their customers are 1.5% more energy efficient each year.

Member states wanted to add exemptions to suit their national circumstances, such as one for suppliers that had taken “early action” in the past four years, and one for suppliers who make savings in energy generation.The end result was a wishlist of exemptions so long that, according to the Commission’s assessment, an amended proposal would have gone only a third of the way to hitting the 2020 target.

MEPs said they would not agree to such a list of exemptions, which could have ended up making the directive weaker than the legislation it was meant to replace. So Denmark came up with a compromise that would allow member states to choose from a list of possible exemptions. However, these exemptions cannot be used to cover more than 25% of their 2020 efficiency target.

According to Friends of the Earth Europe, this means that the efficiency obligations will actually work out at around 1% per year. The green group says that is a meagre commitment, especially as six member states already have in place higher energy-saving obligations. Business opportunitiesThe obligations do provide opportunities for companies that already provide energy-efficiency solutions.

In Denmark, which has had energy-saving obligations for suppliers for years, Dong Energy has developed a business out of providing efficiency improvements for its customers. It is now looking to expand this side of the business into other member states. “Thanks to the new directive, we plan to add…new partnerships with Danish and international companies,” said Lars Clausen, executive vice-president at Dong Europe.

“We are preparing to launch a similar partnership model in the UK, where we already enjoy a strong position.”The Danish Energy Association estimates that €640 billion will be needed to reach the goals set out in the final version of the directive agreed last week. This will open up a significant market in installation and renovation work, as well as energy-efficiency technology and advice.

Although businesses involved in these sectors expressed disappointment that the final agreement did not match the ambition of the Commission’s proposal, they said it still represented a significant business opportunity. “Member states have been blowing hot and cold on this proposal for far too long,” said Tony Robson, chief executive of Knauf Insulation. “Of course, they could have gone much further, but the measures agreed will at least start to give the business community the regulatory guarantees they need to help private investment to flow.”

Some fear that the watered-down version of this directive will not be enough to mobilise investment. But it is a start.